A Dubai tax expert’s guide to what’s changed, what it means for your business, and how to stay compliant
If you produce, import, stockpile, or sell excise goods in the UAE, 2026 has already reshaped the rules you built your compliance calendar around. The Federal Tax Authority (FTA) hasn’t just tweaked a rate here or there – it has fundamentally redesigned how excise tax is calculated for one of the country’s biggest excise categories, tightened enforcement powers across the board, and aligned penalties in ways that change the cost of getting things wrong.
At Vista Financials Accounting and Taxation, we work with importers, F&B manufacturers, distributors, and retailers across Dubai every week who are trying to make sense of these changes. This article breaks down exactly what’s new in UAE excise tax for 2026, why it matters, and what your business needs to do right now – all fact-checked against official FTA publications and Cabinet Decisions.
A Quick Refresher: What Is Excise Tax in the UAE?
Excise tax is an indirect tax the UAE introduced in October 2017 under Federal Decree-Law No. 7 of 2017, targeting goods considered harmful to human health or the environment. Unlike VAT, which is a broad-based 5% tax on most goods and services, excise tax is narrow and punitive by design – it exists to discourage consumption of specific product categories while generating revenue.
The FTA administers excise tax, and any business that imports, produces, releases from a designated zone, or stockpiles excise goods in the UAE is required to register before conducting its first taxable activity. As of 2026, five categories of goods remain subject to excise tax:
- Tobacco and tobacco products : 100% of the excise price
- Electronic smoking devices and tools : 100% of the excise price
- Liquids used in electronic smoking devices : 100% of the excise price
- Energy drinks : 100% of the excise price, unchanged by the 2026 reforms
- Sweetened drinks : now taxed on a completely new tiered, sugar-based model (more on this below)
Carbonated drinks, which used to sit in their own 50% flat-rate category, no longer exist as a standalone excise category from 1 January 2026 onward. This is the single biggest structural change in this year’s update, so let’s unpack it properly.
The Big Change: Sweetened Drinks Now Taxed by Sugar Content, Not Retail Price
For years, the UAE applied a flat 50% excise tax on the retail selling price of sweetened drinks and carbonated drinks, regardless of how much sugar the product actually contained. A zero-sugar diet soda and a heavily sweetened energy soda paid the same rate. That changed on 1 January 2026.
Under Cabinet Decision No. 197 of 2025 on Excise Goods, Tax Rates or Amounts Imposed on Excise Goods, and the Methods of Calculating the Excise Price, issued in line with amendments to Federal Decree-Law No. 7 of 2017 on Excise Tax, the UAE has moved to what the FTA calls a “Tiered-Volumetric Model.” Under this model, tax is no longer a percentage of price – it’s a fixed amount per litre, determined by how much total sugar and sweetener the drink contains per 100ml.
The FTA confirmed the following tiers, which came into force on 1 January 2026:
- High-sugar sweetened drinks: 8 grams or more of total sugar and other sweeteners per 100ml – taxed at AED 1.09 per litre
- Moderate-sugar sweetened drinks: 5 grams or more but less than 8 grams per 100ml – taxed at AED 0.79 per litre
- Low-sugar sweetened drinks: less than 5 grams per 100ml – taxed at AED 0 per litre
- Artificial-sweetener-only drinks (no sugar at all): taxed at AED 0 per litre
Critically, the total sugar calculation combines natural sugar (such as fructose naturally present in fruit juice) and added sugar or sweeteners. If a drink contains even 2g of added sugar per 100ml alongside 6g of naturally occurring sugar, the FTA treats the two as combined for tier purposes – pushing that product toward the high-sugar band. This is a detail many F&B businesses have missed in their early product reviews, and it’s exactly the kind of nuance an experienced excise tax advisor should flag before it costs you at the point of filing.
What Happened to Carbonated Drinks?
Carbonated drinks are no longer a separate excise category. Instead, they’re absorbed into the sweetened drinks framework and taxed purely based on their sugar content. Plain sparkling or soda water with no added sugar or sweeteners falls outside the scope of excise tax entirely from 1 January 2026.
Energy Drinks Are Unaffected
It’s worth being clear on this point because it causes confusion: energy drinks remain subject to excise tax under the existing calculation method, at a flat 100% of the excise price. They are not part of the new tiered-volumetric model.
The Conformity Certificate: A New Mandatory Compliance Step
This is the part of the 2026 update that has caught the most businesses off guard, and it’s where we’re fielding the highest volume of client questions right now.
As of 1 January 2026, every producer, importer, and stockpiler of sweetened drinks must obtain an “Emirates Conformity Certificate for Sugar and Sweeteners Content in Beverages (for Excise Tax purposes)” through the Ministry of Industry and Advanced Technology’s (MoIAT) official website. To get this certificate, you first need a laboratory test report from an accredited lab – one listed by the National Accreditation Department, the Emirates International Accreditation Centre, or certified under ISO/IEC 17025.
Here’s the part that carries real financial consequences: if you don’t have a valid conformity certificate on file, the FTA will automatically classify your product in the high-sugar category – the most expensive tier – regardless of what your actual sugar content might be. There is no benefit of the doubt. The default assumption works against the taxpayer, not in their favour.
Once the certificate is obtained, it must be submitted to the FTA as part of registering or updating your beverage registration on the EmaraTax platform, which now includes a dedicated AI-powered registration service built specifically for the tiered-volumetric model.
Practical takeaway: if your business deals in any sweetened, flavoured, or reconstitutable drink product (this includes concentrates, powders, gels, and extracts – not just ready-to-drink bottles) and you haven’t yet secured your lab report and conformity certificate, you are very likely paying more excise tax than necessary, or risking a compliance gap. This is a fast-moving area where dedicated excise tax advisory services in Dubai can materially protect your margins.
Transitional Relief for Excess Excise Tax Paid
Recognising that businesses needed time to re-test and re-register products under the new model, the FTA introduced transitional relief for deductions of excise tax paid in excess, applicable from 1 January 2026 through 30 June 2026. If your business overpaid excise tax during the transition window – for example, because a product was still classified under the old system while awaiting lab certification – this relief period gives you a mechanism to claim that difference back. Businesses should not let this window close without reviewing their filings from the first half of 2026.
Excise Tax Filing Deadlines Haven’t Changed – But Enforcement Has
One thing the 2026 reforms did not touch is the basic filing rhythm for excise tax. Excise tax returns and payments remain due monthly, by the 15th day of the month following the relevant tax period. If you’re registered for excise tax, this monthly cadence applies regardless of the tiered-volumetric changes.
What has changed significantly is the environment around that deadline.
1. A Unified Penalty Framework Across VAT, Excise, and Corporate Tax
Under Cabinet Decision No. 129 of 2025, effective 14 April 2026, the UAE overhauled its entire administrative penalty structure for tax violations. The stated goals were to simplify the penalty system, encourage voluntary compliance, and – importantly for excise taxpayers – align VAT and excise tax penalties with the corporate tax penalty regime for consistency across all federal taxes. In practice, this means most administrative penalties have been reduced and made more proportionate, though voluntary disclosure penalties have seen a modest increase in some scenarios. Businesses should treat the January–April 2026 window as a natural checkpoint to review historical excise filings and consider voluntary disclosures under the more favourable rules before the new regime fully beds in.
2. Broader FTA Audit and Inspection Powers
Federal Decree-Law No. 17 of 2025, which rewrote the Tax Procedures Law effective 1 January 2026, gave FTA inspectors the authority to inspect excise goods warehouses and Designated Zones without prior notice. Combined with customs authorities’ power to seize excise goods at the point of import if registration or payment isn’t in place, this represents a materially higher enforcement posture than businesses experienced in prior years. The FTA’s own reporting shows inspection activity has already climbed sharply – market inspection visits reached 176,000 in 2025, up 89% year-on-year – and excise goods are a clear enforcement priority given their link to public health objectives.
3. A Five-Year Limit on Credit Balances – Including Excise Tax
Also effective 1 January 2026, businesses can now only carry forward excess recoverable tax credits – including excise tax credits – for five years from the end of the relevant tax period. Previously, unused credits could sit indefinitely. If your business has an aged excise tax credit balance from 2021 or earlier that hasn’t been refunded or applied, it is now on the clock. The FTA has built in a transitional cushion: if your five-year window already expired before 1 January 2026, or expires within a year of that date, you get a fresh one-year period from 1 January 2026 to submit your refund request. This is not a change to overlook – unclaimed credits older than five years are simply forfeited once the window closes.
Why This Matters More Than It Might Seem
It’s tempting to read “sugar tax changes for soft drinks” and assume this is a niche F&B issue. It isn’t. Here’s why UAE businesses across sectors should be paying attention in 2026:
- The enforcement infrastructure is now shared across tax types. EmaraTax cross-references VAT, corporate tax, and excise filings. A discrepancy in one system increasingly triggers scrutiny in another.
- Default classifications now favour the FTA, not the taxpayer. The “high-sugar until proven otherwise” rule for sweetened drinks is a template for how the Authority is approaching compliance more broadly – the burden of proof sits with the business.
- Penalty harmonisation changes your risk calculus. With VAT, excise, and corporate tax penalties now aligned under one framework, a compliance gap in your excise filings can no longer be treated in isolation from your broader tax risk profile.
- Unclaimed money has an expiry date for the first time. The five-year credit limitation is a genuinely new concept in UAE tax administration, and it applies retroactively to older balances.
What Vista Financials Accounting and Taxation Recommends UAE Businesses Do Now
If your business deals in any excise goods – particularly sweetened or carbonated drinks – here is a practical checklist:
- Audit your beverage product portfolio against the new sugar-content tiers and identify anything still awaiting lab certification.
- Secure accredited lab testing and your MoIAT conformity certificate as a priority – every month without one is a month of paying the high-sugar rate by default.
- Update your EmaraTax excise registrations to reflect the new tiered classifications for each affected product.
- Review any excise credit balances older than five years and file refund claims within the transitional window before they lapse.
- Reassess your monthly excise filing process in light of the broader audit and inspection powers now in force – undocumented positions carry more risk than they used to.
- Get a professional second opinion. Given how quickly this framework has moved – from Public Clarification in September 2025, to Cabinet Decision in December 2025, to live enforcement in 2026 – DIY compliance is a real financial risk right now.
In Simple Terms
Here’s the bottom line, stripped of the legal language: if you sell sweetened or carbonated drinks in the UAE, the tax you pay is now based on how much sugar is actually in the product – not its price tag. Get your product tested and certified, or you’ll be taxed at the highest rate whether you deserve it or not. Beyond drinks, the FTA is now watching all excise, VAT, and corporate tax filings more closely than ever, with fewer places to hide old mistakes and a real deadline on old, unclaimed tax credits.
This isn’t a year to guess. Whether you need help testing and reclassifying products, cleaning up historical excise filings, or building a compliance process that holds up under closer FTA scrutiny, working with experienced tax consultants in Dubai – ones who track FTA decisions as they land, not months later – is the difference between paying what you owe and paying more than you should.
Vista Financials Accounting and Taxation provides dedicated excise tax advisory services in Dubai alongside full corporate tax services across the UAE, helping businesses stay ahead of exactly this kind of regulatory shift. If you’re unsure where your business stands under the new excise tax rules, get in touch with our team for a compliance review.
FAQs
1. What changed with the excise tax on drinks in the UAE this year?
Starting January 1, 2026, the UAE moved away from taxing sweetened and carbonated drinks as a percentage of retail price. Sweetened drinks are now taxed per litre based on how much sugar and sweetener they actually contain, and carbonated drinks no longer exist as their own tax category – they’ve been folded into the sweetened drinks framework.
2. How is the new sugar-based tax structured?
There are four bands based on total sugar and sweetener content per 100ml: drinks with 8g or more pay the highest rate, those with 5g up to 8g pay a lower rate, and anything under 5g – along with drinks using only artificial sweeteners – pays no excise tax at all.
3. Does natural sugar count toward the tax band, or just added sugar?
Both. The FTA adds naturally occurring sugar (like fructose in juice) together with any added sugar or sweeteners when determining which band a product falls into. This is a detail our team sees businesses overlook, and it can quietly push a product into a more expensive tier.
4. What happened to plain sparkling or soda water?
If it has no added sugar or sweeteners, it now falls outside excise tax entirely.
5. Are energy drinks affected by these changes?
No. Energy drinks stay under the old system – taxed at a flat 100% of the excise price – and are not part of the new sugar-tier model.
6. What is the conformity certificate, and do I need one?
Any business producing, importing, or stockpiling sweetened drinks now needs an Emirates Conformity Certificate for Sugar and Sweeteners Content, issued through MoIAT. To get it, you first need a lab test from an accredited facility. Without this certificate on file, the FTA will place your product in the highest tax band by default – regardless of its actual sugar content
7. What counts as a “sweetened drink” for this rule – only bottled beverages?
No. The certification requirement extends beyond ready-to-drink products to concentrates, powders, gels, and extracts used to make sweetened or flavoured drinks.
8. We think we overpaid excise tax while waiting on lab certification – can we recover it?
Possibly. The FTA has a transitional relief window running from January 1 to June 30, 2026, allowing businesses to claim back excise tax overpaid during the shift to the new system. We’d recommend reviewing your first-half filings before this window closes.
9. Have excise tax filing deadlines changed?
No, returns and payments are still due monthly, by the 15th of the following month. What has changed is how closely those filings are scrutinised.
10. What does the new penalty framework mean for excise tax violations?
Since April 14, 2026, VAT, excise, and corporate tax penalties have been brought under one unified structure. Most penalties have become more proportionate, though voluntary disclosure penalties have increased slightly in some cases. It also means an excise tax issue is no longer assessed in isolation from your broader tax record.
11. Can FTA inspectors now show up at our warehouse without warning?
Yes. As of January 1, 2026, the FTA has the authority to inspect excise warehouses and Designated Zones unannounced, and customs can seize goods at import if registration or payment isn’t in order. Inspection activity has already risen sharply, so this isn’t a theoretical risk.
12. We have old excise tax credit balances – do we need to act on them?
Yes, and soon. Excess excise tax credits can now only be carried forward for five years. If your window already lapsed before 2026, or lapses within a year of it, you get a one-year grace period from January 1, 2026 to file a refund claim – after that, unclaimed credits are forfeited.
13. Our business isn’t in F&B – does any of this actually affect us?
Possibly, if you deal in excise goods at all. But beyond that, the broader shift matters to most VAT and corporate-tax-registered businesses too: EmaraTax now cross-references filings across tax types, default classifications increasingly favour the FTA rather than the taxpayer, and penalty frameworks are harmonised – so a gap in one filing area can affect your standing elsewhere.
14. What should we be doing right now?
Start with a portfolio review – flag any drink products still awaiting lab certification, secure your MoIAT conformity certificate, update your EmaraTax registrations to the new tiers, and check for aged credit balances before the refund window closes. Given how fast this framework has moved since late 2025, we’d recommend a professional compliance review rather than handling reclassification in-house.
This article reflects UAE Federal Tax Authority publications and Cabinet Decisions in force as of mid-2026, including Cabinet Decision No. 197 of 2025, Federal Decree-Law No. 17 of 2025, and Cabinet Decision No. 129 of 2025. Tax rules can change; businesses should confirm their specific position with a licensed tax agent before making filing decisions.
